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The Regal Cycle Company manufactures three types of bicydes a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for
The Regal Cycle Company manufactures three types of bicydes a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Sales $914,000 262,000 401,000 251,000 Variable manufacturing and selling expenses 472,000 117,000 203,000 152,000 442,000 145,000 198,000 99,000 Fixed expenses Advertising, traceable 70,600 8,900 40,800 20,900 Depreciation of special equipment 43,300 20,300 7,400 15,600 114,900 40,200 38,200 36,500 Salaries of product-line managers Allocated common fixed expenses 182,800 52,400 80,200 50,200 Total fixed expenses 411,600 121,800 166,600 123,200 Net operating income (oss) 30,400 23,200 31,400 (24,200) "Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. Required 1a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) Difference: N Current Total Total If operating Racing Bikes Income Are Dropped Increase or (Decrease Variable manufacturing and selling expenses Contribution margin (loss) Fixed expenses: Advertising traceable Depreciation on special equipment Salaries of product managers Common allocated costs Total fixed expenses Net operating income (loss) MacBook Air
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